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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
FARAH INCORPORATED
(Name of Subject Company)
FARAH INCORPORATED
[GRAPHIC OMITTED]
(Name of Person Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
307387100
(CUSIP Number of Class of Securities)
RICHARD C. ALLENDER
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
FARAH INCORPORATED
4171 N. MESA
BLDG. D, SUITE 500
EL PASO, TEXAS 79902-1433
(Name, address and telephone number of
person authorized to receive notice and communications
on behalf of the person filing statement)
Copy to:
DANIEL W. RABUN
BAKER & MCKENZIE
SUITE 4500
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 978-3000
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This Amendment No. 1 amends and supplements the Solicitation/
Recommendation Statement on Schedule 14D-9 initially filed with the Securities
and Exchange Commission on May 8, 1998 (the "Schedule 14D-9"), by Farah
Incorporated, a Texas corporation (the "Company"). Unless otherwise indicated,
all capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The Section entitled "Reasons for the Recommendation" is hereby deleted
in its entirety and replaced with the following:
Reasons for the Recommendation
In approving the Offer and the Merger Agreement and recommending that
all shareholders tender their Shares pursuant to the Offer, the Board considered
a number of factors, which included those listed below. The Board did not assign
relative weights to the factors or determine that any factor was of particular
importance. Rather, the Board viewed its position and recommendation as being on
the totality of the information presented to it and considered by it.
(a) The Board considered possible alternatives to the Offer and the
Merger, including, without limitation, offers submitted by other bidders and
continuing to operate the Company as an independent entity, and the risks
associated therewith. The Board considered the fact that the Per Share Amount
was the highest amount offered by any prospective purchaser and that the offer
was for all cash rather than stock or a combination of cash and stock. The Board
also considered that continuing to operate the Company as an independent entity
would involve the risk that the Company's financial performance would not
improve which could have an adverse effect on shareholder value.
(b) The Board considered the familiarity of the Board with the
business, results of operations and prospects of the Company and the nature of
its industry.
(c) The Board considered the Company's existing competition in the
industry in which it operates and future competition, the relevant size of other
participants in the industry in which it operates and the available capital and
other resources of such other participants as compared to the available capital
and other resources of the Company. The Board considered that its customers are
placing greater demands on suppliers to provide advertising and to carry larger
amounts of inventory to allow for quick response replenishment of customers'
in-store inventories. These demands require significant financial resources
which may not be available to the Company. The Board considered possible
alternatives to raising additional capital and concluded that such financing, if
available, would not be on terms which would be financially attractive to the
Company. The Board considered the possible adverse effects to the Company and
its shareholders if it failed to meet the customers' demands. The Board also
considered that its two primary competitors have access to capital and other
resources which are greater than those available to the Company, allowing them
to spend greater amounts for advertising and inventories which may provide them
a competitive advantage with customers.
(d) The Board considered the presentation of Financo at the May 1, 1998
Board meeting and the written opinion of Financo that, as of the date of such
opinion and based upon certain matters considered relevant by Financo, the $9.00
per Share in cash to be received by the holders of Shares in the Offer and the
Merger was fair to such holders from a financial point of view. The full text of
the written opinion of Financo dated May 1, 1998, which sets forth assumptions
made, matters considered and limitations on the review undertaken in connection
with the opinion, is attached hereto as Annex B. Shareholders are urged to, and
should, read such opinion carefully in its entirety.
(e) The Board considered that the Per Share Amount represents (i) a
premium of approximately 60% over the closing price for the Shares on March 30,
1998, the last trading day prior to the announcement that Financo had been
retained by the Company, and (ii) a premium of approximately 33% over the
closing price of the Shares on May 1, 1998, the last trading day prior to the
announcement of the Offer.
1
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(f) The Board considered the financial and other terms and conditions
of the Offer and Merger Agreement. In addition to pricing, the primary factors
considered by the Board were the contingencies to successfully closing a
transaction. The Board noted that the proposal from TSI had no significant
conditions to closing, such as a financing condition and other similar
significant conditions.
(g) The Board considered the fact that the terms of the Merger
Agreement should not unduly discourage other third parties from making bona fide
proposals to acquire the Company subsequent to the execution of the Merger
Agreement and, if any such proposals were made, the Board, in the exercise of
its fiduciary duties, could determine to provide information to and engage in
negotiations with any such third party subject to the terms and conditions of
the Merger Agreement.
(h) The Board considered the fact that the Offer and the Merger were
not subject to a financing condition.
(i) The Board considered the likelihood that the Offer and the Merger
would be consummated.
The Board concluded that each of the factors set forth in (a) through
(i) above supported its recommendation that all shareholders tender their Shares
pursuant to the Offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following additional Exhibit is filed herewith.
EXHIBIT
NUMBER DESCRIPTION
(a)(6) Press Release of Farah Incorporated, dated May 29, 1998
2
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 14D-9 is true, complete
and correct.
FARAH INCORPORATED
By: /s/ Richard C. Allender
---------------------------------------
Richard C. Allender
Chairman of the Board, Chief Executive
Officer and President
May 29, 1998
3
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EXHIBIT INDEX
Exhibit
Number Description
(a)(6) Press Release of Farah Incorporated, dated May 29, 1998.
<PAGE> 1
EXHIBIT (a)(b)
[FARAH INCORPORATED LETTERHEAD]
PRESS RELEASE--FOR IMMEDIATE RELEASE
FARAH REPORTS SECOND QUARTER 1998 RESULTS
FOR INFORMATION CALL: RUSSELL G. GIBSON, CHIEF FINANCIAL OFFICER
(915) 496-7502
EL PASO, TEXAS --- MAY 29, 1998 --- FARAH INCORPORATED (NYSE:FRA) FARAH
INCORPORATED reported today a net loss for the second quarter ended May 3, 1998
of $1,335,000 ($.13 per share) on net sales of $66,130,000. This compares to net
income for the same period last year of $3,211,000 ($.31 per share) on net sales
of $70,771,000.
For the first six months of fiscal year 1998, the Company reported a net loss of
$4,405,000 ($.43 per share) on net sales of $125,174,000. For the same 1997
period, the Company reported net income of $1,256,000 ($.12 per share) with net
sales of $132,709,000. Included in the 1998 operating results are pre-tax
charges of $5,281,000 in connection with the planned closure of the Company's
finishing facility in Costa Rica, the reduction in sewing operations at the
Company's other Costa Rican facility, and costs associated with the move to the
new distribution center. Operating results for the first six months of 1997
included pre-tax charges of $3,311,000 which resulted from a loss in connection
with a fire at one of the Company's Irish production facilities, costs
associated with the start-up of new laundry/finishing facilities and the
out-sourcing of more production to independent sewing contractors.
"We are disappointed with our second quarter results," stated Richard C.
Allender, Chairman and Chief Executive Officer. "Despite a promising level of
orders, our net sales were down $4.6 million, or 6.6%, when compared to last
year's net sales levels and our gross margin declined to 23.8% from 28.1%. As
previously reported, the factor contributing most to our negative results was
the start-up of our new distribution center which resulted in canceled orders,
late delivery and freight chargebacks, markdowns on inventory and other related
costs and expenses. We believe that our problems are substantially behind us,
although we continue to refine the systems."
On May 1, 1998, the Company signed a definitive merger agreement with Tropical
Sportswear Int'l Corporation ("Tropical") pursuant to which Tropical has offered
to acquire 100% of the outstanding shares of Farah common stock in a tender
offer. Pursuant to the agreement, Tropical will pay $9.00 per share for each of
the approximately 10.3 million outstanding shares of Farah common stock. The
transaction will be structured as a cash tender offer followed by a cash merger
to acquire any shares not previously tendered. As a result of the transaction,
Farah will become a wholly owned subsidiary of Tropical. The transaction has
been unanimously approved by the Board of Directors of both companies and is
subject to receipt in the tender offer of at least two-thirds of Farah common
stock as well as customary regulatory approvals. The transaction is expected to
close prior to July 1, 1998.
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FARAH REPORTS SECOND QUARTER 1998 RESULTS
Page Two
Certain statements contained herein are "forward-looking" statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, those discussed in filings made by the Company with the
Securities and Exchange Commission.
Farah Incorporated is a multinational apparel marketer and manufacturer
headquartered in the United States. The Company's principal business is the sale
of men's and boys' pants, coats and shirts and women's slacks. The principal
markets for the Company's products are retail customers in the United States,
Europe, and the South Pacific.
Tables follow.
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FARAH REPORTS SECOND QUARTER RESULTS
Page Three
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS: (DATA IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
QUARTER ENDED: MAY 3, 1998 May 4, 1997
----------------- -----------------
<S> <C> <C>
NET SALES $ 66,130 $ 70,771
Cost of sales 50,364 50,883
----------------- -----------------
Gross profit 15,766 19,888
Selling, general & administrative expenses (16,622) (16,970)
Royalty income
361 89
Termination of foreign operations
1,395 --
Production conversion expenses
-- (577)
Relocation expenses
(1,904) --
----------------- -----------------
Operating income (loss)
(1,004) 2,430
Interest expense, net
(1,282) (716)
Other income
255 95
----------------- -----------------
Income (loss) before income taxes
(2,031) 1,809
Income tax expense (benefit)
(696) (1,402)
----------------- -----------------
NET INCOME (LOSS)
(1,335) 3,211
================ =================
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.13) $ 0.31
================ =================
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING - BASIC 10,284,090 10,265,762
================ =================
WEIGHTED AVERAGE SHARES OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS OUTSTANDING - DILUTED 10,284,090 10,434,026
================ =================
SIX MONTHS ENDED: MAY 3, 1998 May 4, 1997
---------------- ------------------
NET SALES $ 125,174 $ 132,709
Cost of sales 93,504 95,113
---------------- ------------------
Gross profit 31,670 37,596
Selling, general & administrative expenses (31,042) (33,016)
Royalty income
706 134
Termination of foreign operations
(2,585) (2,462)
Production conversion expenses
-- (849)
Relocation expenses
(2,696) --
---------------- ------------------
Operating income (loss)
(3,947) 1,403
Interest expense, net
(2,451) (1,232)
Other income
328 248
---------------- ------------------
Income (loss) before income taxes
(6,070) 419
Income tax expense (benefit)
(1,665) (837)
---------------- ------------------
NET INCOME (LOSS)
(4,405) 1,256
================ =================
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.43) $ 0.12
================ =================
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING - BASIC 10,281,540 10,228,432
================ =================
WEIGHTED AVERAGE SHARES OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS OUTSTANDING - DILUTED 10,281,540 10,312,565
================ =================
</TABLE>
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FARAH REPORTS SECOND QUARTER RESULTS
Page Four
<TABLE>
<CAPTION>
SUMMARY FINANCIAL POSITION: MAY 3, 1998 May 4, 1997
----------------- -----------------
<S> <C> <C>
Trade accounts receivable, net $ 35,804 $ 38,643
Inventory 74,519 68,975
Current assets 123,553 122,752
Short-term debt & current installments
of long-term debt 45,382 31,095
Long-term debt 13,900
5,801
Total debt 59,282 36,896
Shareholders' equity 78,011 83,043
</TABLE>
